Obamacare and Your Taxes

By Chuck Bentley

I hope you know that a key part of the Affordable Care Act (ACA) requires that taxpayers have qualifying health care coverage. Those without will need to qualify for an exemption or pay a penalty. This “Individual Shared Responsibility” provision applies to both individuals and families.

If you, your spouse, and everyone else on your tax return (dependents) had “minimum essential coverage,” which includes most employer-sponsored plans, as well as programs such as Medicare, Medicaid CHIP, and insurance purchased through the Health Insurance Marketplace, you’re in fine shape. Just check the appropriate box that says you were insured for the full year. If there were months that someone on your return had no coverage, that person needs to qualify for an exemption or pay a penalty.

obamacare and your taxes

To qualify for an exemption, one of the following situations must exist, says the National Association of Enrolled Agents, an organization for tax professionals:

1. The individual does not have access to affordable coverage because the minimum annual premium available is more than eight percent of the household income;

2. The gap in coverage existed for less than three months; or,

3. The individual qualifies for other exemptions that include a hardship or being a member of a group that is exempt from health coverage (for example, incarcerated inmates or members of a federally-recognized Indian tribe).

Without coverage or an exemption, you’ll have to pay a penalty for each month you were not insured. This penalty is calculated and reported on your tax return. In general, the payment amount is the greater of a percentage of your household income over the filing threshold for your filing status (the percentage increases each year), or a set amount per person (the amount increases each year; it is $695 for adults in 2016). This fee capped at a family maximum of $285 for 2014, $975 in 2015, and $2,085 for 2016.

Originally posted 2/9/2015.

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